End of week Gold and Silver report

 

Gold waited all week for direction:

As the week started gold and other markets had all eyes on a small town in Wyoming called Jackson Hole. That is where an annual meeting is held by the U.S. Federal Reserve and in the past has given way to significant monetary action such as two rounds of easing. There was a lot of speculation and waiting for news. For some, it was not going to be an extraordinary event.  Many financial specialists believe the Jackson Hole meeting will not be the critical event that could trigger further government financial stimulus this time around. “The critical period is really from Friday to the 12th (of September) — the constitutional court decision,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vt. Many others shared a different view of the meetings of the Fed. While the question remains whether there will be another round of monetary easing, if the answer is “no,” it could affect Gold’s price. “We see near term risks of a reversal if Jackson Hole does not deliver what the market is hoping for,” said Nick Trevethan, senior metals strategist at ANZ in Singapore. Friday came and so did the report with Federal Reserve Chairman Ben Bernanke giving indications that the Fed will soon embark on another round of bond buying, otherwise known as quantitative easing (QE). “It is important to achieve further progress, particularly in the labor market,” Bernanke said. “Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.” Bernanke cited previous rounds of easing as effective in stimulating economic development and job creation without hastening inflation.

Europe still trying to work through issues:

Europe clearly took a backseat this week to the Fed’s potential monetary easing announcement, but the European Central Bank (ECB) is readying for an ECB Governing Council meeting next week. James Reid of Deutsche Bank said, “For now, Europe is in a holding pattern ahead of clarity surrounding the next move in the great ECB bond buying maneuverings, and the U.S. is in limbo ahead of Bernanke’s Jackson Hole appearance tomorrow. For the latter, speculation mounts that Bernanke won’t say anything overly new in his speech.” The eurozone is in a battle of its own, regardless of what the Fed decides. Spain is being sucked into the center of the eurozone debt crisis. Spanish consumers have pulled as much as 5 percent of their private sector deposits. The other side of this coin is that Greek banks are seeing a boost in their deposits since June elections. Private sector deposits are up about 2 percent. The World Gold Council is suggesting a creative way of looking at Gold in the eurozone. Many pundits have suggested that troubled eurozone countries sell Gold to take care of their debts. This ill advised idea sounds like a simple resolution, but of course it is more complicated than that. The World Gold Council has suggested bonds and loans backed by Gold. Some groups (LCH.Clearnet, Intercontinental Exchange, and the Chicago Mercantile Exchange) have begun accepting Gold as collateral for margin requirements recently. Gillian Tett of Financial Times wrote that this “suggest(s) that a slow evolution of attitudes is under way — not so much in terms of the desirability of Gold per se, but the increasing undesirability and riskiness of other supposedly ‘safe’ assets, such as government bonds.”

United States economy still giving mixed reports:

In the U.S.A., a trend of economic growth could be a reason the announcement of another round of easing by the Federal Reserve was not made today. One discussion is surrounding the small amount of growth and whether it is enough to sustain a positive direction moving forward. The United States’ gross domestic product (GDP) went up in the second quarter by 1.7 percent, which was 0.2 percent more than a previous estimate. The GDP is seen as a key indicator of the economy. While there was improvement, many believe it was at a level low enough to warrant more action by the Fed. The release of the weekly jobless claims report has had little effect on Gold and Silver. The four week moving average of new claims rose by 1,500, while the week to week change was flat. Personal consumer spending increased in July to a five month high, according to data from the Commerce Department. Falling gasoline prices coupled with moderate increases in income to provide consumers a bit more to spend this midsummer. Despite July’s increase, consumers have been cautious on spending for most of the year, with a decrease in June and a flat report in May. “In the first quarter of the year, Americans saved less in order to spend more,” said Chris Christopher, senior economist at IHS Global Insight. “In the second quarter, job prospects were not very promising, so Americans put more money aside and spent less.”

 

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Precious Metals prices are on the upswing this morning, following the euro

 

Precious Metals prices are on the upswing this morning, following the euro.  The common currency is rebounding on news that the European Union bailout fund will be able to support troubled Spain by buying Spanish bonds.  Mitsui Precious Metals analyst David Jollie said, “It seems that every time we do not have [a third round of quantitative easing] announced, gold slips back as some of these more speculative positions are liquidated.  After that disappointed selling, I think the market returns to more normal behavior and some of these speculators will try to rebuild positions.  Others such as the official sector are also likely buyers on price declines.”

Federal Reserve Chairman Ben Bernanke’s second day of testimony was as uneventful as expected in the way of QE3 announcements.  Strategists at Lloyds Bank said, “Barring some severe intervening event or drastic downside data prints over the coming 10 sessions, it would appear that the chances of additional monetary stimulus … being announced in the immediate future are receding.  Indeed, the timeline for Fed action is becoming increasingly tight, hemmed in as it potentially is by the looming presidential election in November.”

American stock futures are on the rise this morning, despite an increase in jobless claims.  Economists expected an increase in claims to 365,000, but the actual number came in much higher at 386,000.  These numbers have had less of an effect recently, as Daniel Silver of JPMorgan Chase & Co. explains.  He said, “We have to ignore claims for a few weeks because it’s just too hard to get a true signal from the numbers.  Even just a small mistake in the seasonal factors can generate big changes.”

At 9 a.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold – $1,585.40 – Up $13.00.
  • Silver – $27.49 – Up $0.31.
  • Platinum – $1,417.90 – Up $13.70.
  • Palladium – $582.50 – Up $4.00.

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 8 p.m. (EDT)! Or call us Fridays until 6 p.m. (EDT)! If you have any questions about investing in Precious Metals or simply would prefer to place your order by telephone, we are here to help.

 

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APMEX End of Week Report for 6/8/2012

Bernanke Speaks:

Official portrait of Federal Reserve Chairman ...

Official portrait of Federal Reserve Chairman Ben Bernanke. (Photo credit: Wikipedia)

Gold has had ups and downs this week. The market has many investors questioning the long term outlook for Precious Metals.  As with all investments, there will be unknown factors.  At present, there is the European economic crisis, the Chinese economic slowdown, and underachieved goals for a better American economy. With these situations being in play, it could signal good news for investors. Dennis Gartman, author of The Gartman Letter, said, “The trend for Gold is still from the lower left to the upper right. I think that you want to own Gold in dollar terms; I think you want to own Gold in euro terms; I think you need to own Gold in yen terms. And quite honestly at this point, given the economic circumstances, I think you’d like to be long of gold and short the stock market.”  There was a lot of cautious optimism bubbling ahead of Federal Reserve Chairman Ben Bernanke’s testimony before Congress this week.   Global strategist Dan Greenhaus said, “There’s just been, for the last 48, 72 hours, a growing feeling that a 10 percent decline in the stock market is as deep a decline as you would get with Ben Bernanke lurking tomorrow.” He also added, “The fate of the market in the next couple of days is in Ben Bernanke’s hands, and it’s over his interpretation of the state of the economy.”  That interpretation wasn’t as clear as some would hope, as Chairman Bernanke refused to tip his hat regarding any new stimulus package.  Bernanke indicated that while the central bank is willing to protect the economy from “worsening,” he did not specify what actions (if any) the Fed would take. “The Gold bulls are desperately hoping for further mention of some form of stimulus from the Fed,” said David Govett of Marex Spectron. “If some form of this is put on the table, then I expect Gold will react very positively. If however, as I personally believe, the Fed leaves things as they are for the time being, this will be viewed as negative and Gold will fall.”

Spanish Debt Downgrade:

MADRID, SPAIN - MARCH 30:  Spain's Minister of...

MADRID, SPAIN – MARCH 30: Spain’s Minister of Treasury and Civil Services Cristobal Montoro Romero unviels Spain’s budget for 2012, during a press conference at the Moncloa Palace on March 30, 2012 in Madrid, Spain. The budget for 2012, which comes in the wake of a 24-hour general strike, includes over 27 bn euros in savings. (Image credit: Getty Images via @daylife)

At the G-7 conference this week, Spain’s Treasury Minister Cristobal Montoro sounded the alarm about how bad the banking situation is in Spain at this time. As the debt gets worse the access to credit to help bail themselves out is becoming more and more detrimental. He even called for European assistance, a departure from what other government officials had wanted, which was to raise the funds itself.  In an interview Montoro said, “The risk premium says Spain doesn’t have the market door open. The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt.” That problem grew later in the week when ratings agency Fitch downgraded Spanish debt from A to BBB on concerns that the country will need a bailout package to avoid economic disaster. Furthermore, Fitch’s outlook is negative, which means that more downgrades are likely.  German Chancellor Angela Merkel reacted by reiterating Germany’s commitment to helping its weaker eurozone partners. “It is important to stress again that we have created the instruments for support in the eurozone and that Germany is ready to use these instruments whenever it may prove necessary,” she said.

Germany Holding the Reigns:

Germany appears to be willing to trade a greater role supporting its indebted EU partners for more centralized control over government spending in member nations. While

Deutsch: Dr. Angela Merkel Bundeskanzlerin der...

Deutsch: Dr. Angela Merkel Bundeskanzlerin der Bundesrepublik Deutschland Vorsitzende der CDU Deutschlands (Photo credit: Wikipedia)

continuing to stay away from the idea of “eurobonds,” there is growing interest in pooling the bad debt with a payoff timetable of 25 years. “The world wants to know how we expect the political union to complement the currency union,” German Chancellor Angela Merkel said. “We have to find an answer in the foreseeable future.” In comments later this week Chancellor Angela Merkel said that Germany will use all the tools it has available to support the 17-nation eurozone. “In view of the current difficulties, it’s important to emphasize that we have created the instruments of support in the eurozone, that Germany is ready to work with these instruments whenever that is necessary, and that this is an expression of our firm desire to keep the euro area stable.”  Merkel, however, has not backed off her rejection of debt sharing or access to euro bailout funds for Spanish banks.

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